Oil shipping costs soar for key routes following invasion and sanctions
[LONDON] The escalating crisis over Ukraine has upended the cost of shipping oil by sea. Freight rates for hauling crude from Russia are surging as Western sanctions push up the risks of carrying cargoes on those routes, while a scramble for alternative supplies boosts the rates for other passages.
Shipowners are offering at least double the last transacted rate to carry so-called ESPO crude from Kozmino, which loads oil from Russia's Far East, to ports in China, said traders and a shipbroker who asked not to be identified.
At the same time, the cost of shipping oil from the US to Ningbo in China's Zhejiang province in the north-east by supertanker has jumped, as has the rate for Ceyhan, Turkey, to China.
Commodity markets have been pitched into turmoil by the Russian invasion, with merchant vessels hit in the Black Sea. Brent crude has topped US$100 a barrel, and prices surged again Monday after a fresh raft of Western sanctions was directed against the Russian central bank and other entities. This is raising the risk of handling the nation's raw materials, while boosting the incentive to take alternatives to Russian oil such as US and Persian Gulf grades.
Although US oil is considered pricey relative to comparable crude from the Middle East, grades from the US Gulf Coast such as Mars Blend are alternatives to Russia's flagship Urals crude, traders said. Other replacements are Iraq's Basrah Medium and Saudi Arabia's Arab Light, while those for ESPO and Sokol include Murban, Arab Extra Light and even West Texas Intermediate Midland.
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